Preservation--What's it Worth?

Historic homes and historic districts all around us are being destroyed. And once gone, they are gone forever.

When we lose these homes or commercial buildings we have lost more than a building—we lose our connection to our past, our since of community, our individuality, our history.

The good news is that smart communities are embracing historic preservation—not because they want to save “old buildings” (although for many of us, this is reason enough), but because it makes economic sense to do so.

In my town, I have fought hard, along with others, to help the City understand that historic preservation is good for the pocket book—both the City’s coffers and those who don’t own a historic home. Accordingly, we should be encouraging historic preservation through all available incentive programs (like the Mills Act).

As part of 5 year struggle to get our City to implement the Mills Act, I prepared numerous letters and presentations to both the City Council and the Historic Preservation Review Commission. One such document is below. I am including this on my blog because I thought someone else may be able to use it…

If it encourage one other person to help save a historic home or a historic district in THEIR town, then it will….well you know the rest….I hope this is useful for others.

For those people in California, the Mills Act is state-sponsered tax incentive program (implemented at the local level) which provides for some property tax relief provided that the homeowner "preserve, maintain, and when necessary, rehabilitate a property pursuant to the Secretary of the Interior's Standards for Rehabilitation." You can find more information on the Mills Act here.


One caveat about what is written below--Much of the information is dated. I tried to provide links to the resources and areas that I got quotes and statistics. I hope they work. If you are to use this information, I would double check all hyperlinks and information (I'm not the computer geek I'd like to be...)

THE ECONOMICS OF HISTORIC PRESERVATION

PREPARED FOR THE

HISTORIC PRESERVATION REVIEW COMMISSION

INTRODUCTION

"Historic preservation has often been portrayed as the alternative to economic development—‘either we have historic preservation OR we have economic growth.’ This is an absolutely false choice. Increasingly...historic preservation is becoming a uniquely effective vehicle for economic growth. [1] " As outlined below, historic preservation and economic vitality are really one in the same.

INVESTING IN PRESERVATION MAKES ECONOMIC SENSE:

Preservation and economic viability are not mutually exclusive. In fact, investments into preservation have shown to have a greater economic return than many other industries. Consider the following from Forging A Future With A Past: A Comprehensive Statewide Historic Preservation Plan For California: [2]

A key factor in the allocation of public funds in any program is the measurement of how many jobs will be created by the outlay. In a dollar for dollar comparison between job generation for $1 million in investment in new construction vs. $1 million in investment in rehabilitation for historic buildings, historic preservation is one of the highest job generating economic developments available.

In California, $1 million in rehabilitation creates 5 more jobs than $1 million dollars spent on manufacturing electric equipment. (The Economics of Historic Preservation, Donovan Rypkema)

In each of the ways that the U.S. Department of Commerce measures the impact of production in an industry-- the number of jobs created, the increase in local household incomes, and the impact on all other industries "rehabilitation outperforms new construction every time."

A case study of a comparison of expenditure of $1 million dollars spent on rehabilitation vs. new construction would produce the following results in a community (The Economics of Historic Preservation, Donovan Rypkema):

1. $120,000 more dollars will initially stay in the community with rehabilitation vs. new construction.
2. 5-9 new jobs will be created with rehabilitation than with new construction.
3. 4.7 more new jobs will be created elsewhere in the community with rehabilitation than with new construction.
4. Household incomes in the community will increase $107,000 more with rehabilitation than with new construction.
5. Retail sales in the community will increase $142,000, that is $34,000 with a million dollar expenditure on new construction
6. Real estate companies, lending institutions, personal service vendors, and eating and drinking establishments will all receive more monetary benefit from $1 million in rehabilitation than $1 million in new construction.

Accordingly, preservation of historic resources not only help preserve our history, it helps foster a sound economic program for the entire community without the corresponding cost of increased infrastructure associated with new development (police and fire, sewage, water needs, street repair/maintenance, utilities, etc.). By investing into preservation and rehabilitation of historic resources rather than bulldozing and building new, the City can see a greater return on investment.

SPECIFIC ECONOMIC BENEFITS UNDER THE MILLS ACT:

• Well maintained historic homes increases values of surrounding homes, thus have a net gain in property taxes.

• By voluntarily participating in the Mills Act, a property owner effectively removes a property from the battlefield of historic preservation vs. property rights arguments. This means less City Staff time preparing for and attending Design Review, Planning Commission, and appeals to City Council.

• Long time owners will not apply for the Mills Act because they will not see a reduction. However, in most cases a subsequent owner, who applies for a Mills Act contract, will most likely STILL pay more taxes than the previous owner. Thus, the City still has a net gain.

• Increased opportunity for fund raising for charitable causes. For example, the Benicia Historical Society raised $4,000 in their Historic Home Tour that was donated to the City for their own restoration efforts.

• Property taxes STILL increase under the Mills Act as "income" method may dictate that taxes should increase.

• In the City's own poll, Historic Preservation was ranked as one of the most pressing concerns of citizens. Under the Mills Act, the City can utilize a tax incentive program to promote and encourage preservation.

ECONOMIC DEVELOPMENT THROUGH HISTORIC PRESERVATION

Given that investments into historic preservation have shown a greater return than investments into new constructions, many progressive Cities have made preservation of historic resources a major component of their economic development strategy: "Historic preservation has moved from being an end in itself (save the old buildings in order to save old buildings) to being a vehicle of broader ends "center city revitalization, job creation, small business incubation, housing tourism, and others." [3] Such a City philosophy has the following economic development benefits: [4] (quoted verbatim):

• JOB CREATION: The labor intensity of building rehabilitation generally means that there is a greater local economic impact in jobs and income that with the same amount of new construction.

• JOB TRAINING AND SKILLS PASSING: The local craftsmanship of the building process can often be nearly lost in a generation but instead can be passed on through historic preservation, creating jobs and skills simultaneously.

• IMPORT SUBSTITUTION: A central strategy in building a sustainable local economy is import substitution "creating locally what otherwise would have to be purchased elsewhere." Almost by definition historic preservation is locally based, using expertise, labor, and materials from the local market. Often new construction is the opposite, requiring the importation of expertise, materials, and often labor from elsewhere.

• REFLECTS PRODUCT DIFFERENTIATION: In economics it is the differentiated product that commands a monetary premium. If in the long run a community wants to attract capital, to attract investment, it must differentiate itself from anywhere else. It is the built environment that expresses, perhaps better than anything else, a community's diversity, identity, individuality, in short its differentiation. [Benicia, by virtue of its historic buildings and connection to the history of our state and nation, has many unique resources that make it special. This asset needs to be protected because it attracts money to our area.]

• MOST EFFECTIVE VENUE FOR CULTURAL GOODS AND SERVICES: For communities that have cultural assets and crafts products that represent economic opportunity, historic buildings often constitute the most appropriate physical locations for the sale and display of goods and the presentation of productions. The physical context of the historic building adds to the sense of authenticity, originality, and indigenousness of the art. [In Benicia, the artist community attracts a tremendous amount of visitors to our area that spend their money on local art adding to the sales tax revenue. In addition, other businesses benefit from this attraction--dining establishments, hotels, gasoline vendors, and others.

• NATURAL INCUBATOR FOR SMALL ENTERPRISES: Regardless of a nation's overall economic or social system, entrepreneurship nearly always begins on a small scale--a one or two person operation. The size, location, character, and often pricing of historic buildings means that they frequently serve as natural incubators of emerging enterprises.

• HERITAGE TOURISM: "California tourism is also an industry that depends for much of its strength and vitality on the existence of heritage resources." [quoting the publication Heritage and Tourism in California]..."Because not every county in California has a Disneyland, a Yosemite, or coastal beaches, heritage tourism represents and important attraction for many rural counties...." [5]

Tourism is big business. In 1998, travel and tourism contributed $502.4 billion to the U.S. economy. Travel and tourism is the third largest retail industry in the U.S. behind automotive dealers and food stores. Travel and tourism supported more than 7 million jobs and indirectly supports another 9.2 million jobs, creating a total of 16.2 million jobs- including more than 650,000 executive level positions (Source: 1998 Travel Industry Association "Tourism Works for America Report").

In addition to creating new jobs, new business and higher property values, well-managed tourism improves the quality of life and builds community pride. According to a 1997 Report on Cultural and Historic Tourism, visitors to historic sites stay longer and spend more money than other kinds of tourists. Visitors to historic and cultural attractions spend, on average, $615 per trip compared to $425 for all U.S. travelers, and they spend an average of 4.7 nights away from home as compared to 3.3 nights for all other travelers. (Source: Travel Industry Association of America).

PUBLIC POLICY REASONS FOR HISTORIC PRESERVATION AS ECONOMIC DEVELOPMENT

In the City of Benicia General Plan, there are many Policies, Goals, and Programs listed that amount to public policy as the desires and wishes of the citizens of Benicia. "Historic preservation also has numerous attributes which warrant using preservation as an economic development tool from a public policy perspective." [6]

• TARGETED AREAS: Historic buildings are usually located in areas that are otherwise determined as appropriate targets for public intervention--center cities, close in residential neighborhoods, rural villages.
  
  [Locally, the City of Benicia has "targeted" the historic downtown and the Arsenal area as deserving attention by specifically mentioning the need to protect these areas. From The City of Benicia General Plan, 1999:
  
  GOAL 3.1: Maintain and enhance Benicia's historic character.
  POLICY 3.1.4: Promote the preservation and enhancement of historic neighborhoods, commercial areas, and government districts.

• NOT A ZERO-SUM GAME: Many approaches to economic development are essentially zero-sum games. That is to say, for community "A "to succeed community "B" has to lose (a factory recruited from place "A" to relocate to place "B," for example). Because nearly every community has its own historic resources that can be used to house a variety of activities, for one community to benefit from the adaptive reuse of its historic structures in no way precludes another community from doing so as well. [Clearly, Cities like Calistoga and Mendecino have benefitted tremendously from their public policy to not engage in this zero-sum game and instead concentrate on their historic resources to bring in funds].

• RANGE OF PROJECT SCALES: A variety of factors will affect the public sector's ability to implement plans on a large scale. Financial constraints, political factors, environmental concerns are all reasons that the "big project" is often delayed or shelved. Historic preservation, however, can be done at virtually every scale, from the smallest shop building to the massive revitalization of areas in large metropolitan regions. The smaller projects can proceed while larger ones are still on the drawing board.

• COUNTER-CYCLICAL: Even non-market economics are not immune to the ups and downs of world wide economic cycles. Because of their scale, cost and labor intensity, historic preservation projects are often possible even in down cycle periods, providing a measure of job and income stability to a local community

• INCREMENTAL CHANGE: It isn't inherently change that seriously adversely affects a local economy and its culture; it is change that is rapid, massive, and beyond local control. Historic preservation by definition is an incremental strategy within the framework of an existing community, not an immediate and overwhelming type of change which often leads to feelings of powerlessness locally and a decline in the sense of community. [Anyone who has escaped Southern California can relate to this.]

CONCLUSION:

Simply put, historic preservation makes the cash registers ring. It is part of a sound economic, plan that is good for the local economy, local labor, and the community as a whole. The Mills Act incentives for preservation and rehabilitation means that the City need not bare much of the costs of implementation.

"For the 21st Century only the foolish community will make the choice between historic preservation and economic development. The wise community will effectively utilize its historic built environment to meet the economic, social and cultural needs of its citizens well into the future. " [7]